The effects of an unconditional cash transfer on parents' mental health in the United States

Abstract

The provision of unconditional cash transfers may be one effective policy strategy for improving mental health, but causal evidence on their efficacy is rare in high‐income countries. This study investigates the mental health consequences of the 2021 child tax credit (CTC) expansion, which temporarily provided unconditional and monthly cash support to most families with children in the United States. Using data from the Behavioral Risk Factor Surveillance System, we exploit differences in CTC benefit levels for households with younger versus older children. More generous CTC transfers are associated with a decrease in the number of bad mental health days reported by the parents. The effect materializes after the third monthly payment and disappears when the benefits are withdrawn. The CTC's improvement of mental health is larger for more credit‐constrained individuals, including low‐income households, women, and younger respondents.